Econ Exam 3

Economies of scale refers to returns that occur when: A. an increase in the quantity of output decreases average total cost in the long run. B. an increase in the quantity of output increases average total cost in the long run. C. None of these is true. D. average total cost does not depend on the quantity of output in the long run.

A. an increase in the quantity of output decreases average total cost in the long run.

Spending a lot on advertising: A. can act as a credible signal to consumers of high-quality products B. does not serve as a credible signal to consumers, since and producer can do it. C. can act as a credible signal to producers to create high quality substitutes. D. can act as a credible signal to consumers of low-quality products

A. can act as a credible signal to consumers of high-quality products

A price taker is a buyer or seller who: A. has no control over setting the market price. B. has complete control over setting the market price. C. can influence the market price. D. has the goal of maximizing market share, not profits.

A. has no control over setting the market price.

If the demand for hand-sewn leather shoes increases, it is likely the demand for: A. leather will also increase. B. leather will stay the same. C. leather will drop significantly and producers will use another material D. leather will decrease slightly

A. leather will also increase

A firm that is the sole producer of a good or service with no close substitutes is called a: A. monopolist B. monopolistically competitive firm C. Perfectly competitive firm D. oligopolist

A. monopolist

The factors of production are: A. the ingredients that go into making any good or service B. the costs and benefits of a given production process C. the list of inputs required for a given durable good. D. the outputs that society as a whole have chosen to produce.

A. the ingredients that go into making any good or service.

If producers who hire labor in a competitive labor market decide to purchase the new automated machine that completes the work of thirty employees, we would expect: A. the labor-demand curve in that market to shift left B. the labor-demand curve in that market to shift right C. the labor-supply cure in that market to shift right D. the labor-supply curve in that market to shift left

A. the labor-demand curve in that market to shift left

The value of the marginal product is: A. the marginal product generated by an additional unit of input times the price of the output. B. the marginal revenue generated by additional units of output times the number of workers hired. C. the additional inputs required to produce one more additional unit of output. D. none of these statements is true

A. the marginal product generated by an additional unit of input times the price of the output.

The revenue curves the monopoly faces are different from that a perfectly competitive market firm faces in that: A. the marginal revenue curve is downward sloping instead of flat. B. the average revenue curve is no longer equal to the price. C. the marginal revenue curve is now flat instead of downward sloping. D. the revenue curves are the same for the firm regardless of market structure.

A. the marginal revenue curve is downward sloping instead of flat.

The monopolist faces: A. a perfectly elastic demand curve B. a downward sloping demand curve C. a perfectly inelastic demand curve D. the monopolist may face any of these demand curves

B. a downward sloping demand curve.

A market in which a single firm can produce, at a lower cost than multiple firms, the entire quantity of output demanded is called: A. diseconomies of scale B. a natural monopoly C. price gouging D. government intervention

B. a natural monopoly

when the competitive firm's value of the marginal product of labor intersects the market-wage level, the firm: A. can increase its profits by hiring any amount less than this point. B. has found the profit-maximizing quantity of labor to hire C. can increase its profits by hiring any amount greater than that point D. none of these statements is true

B. has found the profit-maximizing quantity of labor to hire.

An efficiency wage is a wage that: A. most unionized workers negotiate to get rid of B. is deliberately set above the market rate to increase worker productivity C. the government sets deliberately above the market rate to increase equity D. none of these statements is true.

B. is deliberately set above the market rate in order to increase worker productivity

The two types of market structures that are imperfectly competitive are: A. perfect competition and monopolistic competition B. monopolistic competition and oligopoly C. monopoly and perfect competition D. oligopoly and monopoly

B. monopolistic competition and oligopoly

A firm realizes that the market price has fallen below its average total costs, and it is now earning loss. What is the best action for the firm to take in the short run: A. shut down if price is greater than average variable costs B. stay open if price is greater than average variable costs C. stay open if total revenue is greater than fixed costs D. shut down immediately and pay fixed costs only

B. stay open if price is greater than average variable costs

Price discrimination is: A. the process of customers choosing items based on price. B. the practice of charging customers different prices for the same good. C. choosing which prices to charge for certain items D. the practices of charging customers the same price for a variety of similar goods.

B. the practice of charging customers different prices for the same good.

Given the shutdown rule, what does the firm's short-run supply curve look like? A. It is the section of the MC that lies above the ATC curve. B.It is the section of that ATC curve to the right of its minimum. C. It is the section of the MC that lies above the AVC curve. D. It is the section of the AVC curve to the right of its minimum.

C. It is the section of the MC that lies above the AVC curve.

The long-run exit rule is to exit the industry if: A. P<AVC B. P>AVC C. P<ATC D. P>ATC

C. P<ATC

For a monopolist, average revenues: A. are always zero at the profit maximizing quantity. B. are maximized when total revenue are maximized. C. are always equal to price D. equal price only at the profit maximizing quantity

C. are always equal to price.

The equilibrium price and quantity in a monopoly market: A. is the same as a perfectly competitive market. B. causes no welfare costs C. causes a loss of total surplus D. is efficient

C. causes a loss of total surplus

If firms are producing at a profit-maximizing level of output where the price is equal to the average total cost: A. accounting profits may be negative. B. accounting profits must be zero. C. economic profits must be zero. D. economic profits must be positive

C. economic profits must be zero.

If wages drop below the market equilibrium level in a competitive labor market: A. unemployment will persist until wage increases B. firms will be able to offer lower wages and still fill all the jobs they have. C. firms will demand more labor than workers are willing to supply D. All of these statements are true.

C. firms will demand more labor that workers are willing to supply.

The marginal product of any input into the production process: A. is the constant ratio of inputs to outputs. B. is the decrease in input that is generated by an additional unit of output. C. is the increase in output that is generated by an additional unit of input. D. None of these statements is true.

C. is the increase in output that is generated by an additional unit of input.

When economic profits are zero, accounting profits are most likely: A. zero B. all of these are likely C. positive D. negative

C. positive

The competitive firm's profit-maximizing quantity of labor is the quantity where: A. the quantity of the marginal product of labor is equal to the market wage. B. the value of the marginal product of labor is equal to the profit. C. the value of the marginal product of labor is equal to the market wage. D. the quantity of the marginal product of labor is equal to zero.

C. the value of the marginal product of labor is equal to the market wage

In a perfectly competitive market price takers exist because: A. there are few sellers and many buyers B. there are few sellers and buyers C. there are many buyers and sellers D. there are few buyers and many sellers

C. there are many buyers and sellers

In the short-run, product differentiation enables firms in monopolistically competitive markets to: A. produce a good for which there are no close substitutes B. act like price takers C. produce a good for which there are exact substitutes D. act like monopolists

D. act like monopolists

Increased border patrol will affect the labor market in California. With a ______________ in labor supply, we would expect wages to _________________. A. increase; increase B. increase; decrease C. decrease; decrease D. decrease; increase

D. decrease; increase

In the long run, a profit-maximizing monopolistically competitive firm sells at a price that is: A. equal to average total cost, but lower than marginal cost. B. equal to marginal cost and marginal revenue. C. equal to demand, but higher that average total cost and marginal cost D. equal to average total cost, but higher than marginal cost

D. equal to average total cost, but higher than marginal cost

If the demand for a good increases, it is likely that the demand for the factors of production used as inputs will: A. none of these is true B. stay the same C. decrease D. increase

D. increase

For a monopolist, at the profit-maximizing level of output: A. marginal revenue is greater than average revenue B. none of these statements is true C. average revenue is greater than price D. price is greater than marginal revenue

D. price is greater than marginal revenue

The process of entry and exit into a monopolistically competitive market causes: A. the firm's supply curve to shift left and/or right B. the firm's average total cost curve to shift left and/or right C. the firm's marginal cost curve to shift straight up and/or down D. the firm's demand curve to shift left and/or right

D. the firm's demand curve to shift left and/or right.

If producers who hire labor in a competitive labor market decide to purchase the new automated machine that completes the work of 30 employees, we would expect: A. the labor-supply curve in that market to shift left B. the labor-demand curve in that market to shift right C. the labor-supply curve in that market to shift right D. the labor-demand curve in that market to shift left

D. the labor-demand curve in that market to shift left

If a firm stops production, then its: A. all of these are true B. total costs may increase or decrease C. fixed costs rise D. variable costs drop to zero

D. variable costs drop to zero